Laurence Onwufuju v The Commissioners for HMRC [2024] UKFTT 52 (TC)

[2024] UKFTT 00052 (TC)

Case No TC09034

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 8 December 2023

Date Judgment date: 3 January 2024

In public by remote video hearing

Appeal reference: TC/2022/11664

VAT – company assessments – company penalty for deliberate behaviour – PLN issued to appellant – late appeal – application for permission to make late appeal – HMRC application to strike out appeal if permission granted – appellant’s application rejected – appeal would have been struck out in any event

Before

TRIBUNAL JUDGE NIGEL POPPLEWELL

Between

LAURENCE ONWUFUJUAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

In person for Appellant

Ben Hayhurst litigator of HM Revenue and Customs’ Solicitor’s Office for Respondents

DECISION

Introduction

[1]This decision deals with two matters. Firstly, whether I should exercise my judicial discretion and permit the appellant to make a late appeal against the imposition of a personal liability notice dated 11 April 2022 in an amount of £1,712,097.10 (“the PLN”). Secondly, if I do allow the appellant’s application, whether I should go on to strike out the appellant’s substantive appeal against the PLN which, in HMRC's view, has no reasonable prospects of success. THE LAW Substantive appeal

THE LAW

[2]The rules, case law, and legislation which are relevant to striking out, penalties and the obligation to account for VAT are set out in the appendix. Words and phrases defined therein have the same meanings in the body of this decision. However, in a nutshell: (1). When considering whether the appellant’s case has a reasonable prospect of succeeding, I need to consider whether he has a realistic as opposed to a fanciful prospect of success i.e. the claim must carry some degree of conviction and is more than merely arguable. (2). Where a penalty for submitting an inaccurate return is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as HMRC may specify by written notice to the officer. (3). For there to be a “deliberate” inaccuracy HMRC have to establish an intention to mislead HMRC on the part of the taxpayer as to the truth of the relevant statement.

Late appeal

[3]When deciding whether to give permission, the tribunal is exercising judicial discretion, and the principles which should be followed when considering that discretion are set out in Martland v HMRC

[2018] UKUT 178 (TCC)

, (“Martland”) in which the Upper Tribunal considered an appellant’s appeal against the FTT’s decision to refuse his application to bring a late appeal against an assessment of excise duty and a penalty. The Upper Tribunal said:

“44. When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in Denton: (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being "neither serious nor significant"), then the FTT "is unlikely to need to spend much time on the second and third stages" - though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages. (2) The reason (or reasons) why the default occurred should be established. (3) The FTT can then move onto its evaluation of "all the circumstances of the case". This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission. 45. That balancing exercise should take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. By approaching matters in this way, it can readily be seen that, to the extent they are relevant in the circumstances of the particular case, all the factors raised in Aberdeen and Data Select will be covered, without the need to refer back explicitly to those cases and attempt to structure the FTT's deliberations artificially by reference to those factors. The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist. 46. In doing so, the FTT can have regard to any obvious strength or weakness of the applicant's case; this goes to the question of prejudice - there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal”

THE EVIDENCE AND THE FACTS

[4]I was provided with two bundles of documents. The appellant gave oral evidence. Oral evidence was given by Officer Jason Harris on behalf of HMRC. From this evidence I find the following: Background (1). Webstar Dixon Limited (“the company”) was incorporated on 25 October 2011. It was registered for VAT on 1 December 2013 and listed its business activities as the wholesale of pharmaceutical products within the UK, EEA, and overseas, and as a wholesale pharmaceutical goods importer and exporter. (2). The appellant was appointed a director on 6 June 2016. At that time he owned 100% of the shares in the company. (3). He had been made bankrupt on 7 April 2015, the petitioner being HMRC. Officer Harris’ unchallenged evidence was that the appellant had been involved in ten other companies which had demonstrated serial noncompliance with VAT legislation. Many of these companies had deregistered and had been dissolved owing money to HMRC. (4). The appellant is currently shown as operating as an accountant in Essex. (5). In a telephone conversation with HMRC on 24 June 2019, the appellant told HMRC that the company provided marketing advertising logistics and distribution services to UK clients wanting to market their products in West Africa. (6). In 2022 the company was put into liquidation. The assessments and the PLN (7). In the VAT periods 04/16 to 10/18 the company issued invoices to Medpro Healthcare Ltd (“Medpro”) of a net value of approximately £12,229,286. Each invoice also charged Medpro VAT at 20% which amount was identified on each invoice. (8). In all of those periods, the company submitted nil VAT returns (in other words for each period it submitted a VAT return in which it assessed its liability to output tax as being zero). (9). On 27 March 2020 HMRC issued a VAT assessment to the company for periods from 04/17 to 10/18 assessing underdeclared VAT at £1,149,918. On 28 May 2020 HMRC issued a VAT assessment to the company for the periods 04/16 to 01/18 assessing underdeclared VAT at £1,295,939 (together “the assessments”). The total VAT at stake is therefore £2,445,853. (10). On 11 April 2022 HMRC assessed the company to a penalty of £1,712,097.10 (“the company penalty”). This penalty was raised under Schedule 24 to the Finance Act 2007 as a result of inaccuracies in the company’s VAT returns and was based on the figures set out in the assessments. It was based on deliberate behaviour and calculated at 70% of the value of the assessments. The explanation in the penalty schedule for the conclusion that the behaviour was deliberate was that the company deliberately did not declare the sales which were made to [Medpro] and would have known that the VAT returns were inaccurate. Information held showed that the company had issued invoices for net sales of £22,667,558. The company had failed to declare this to HMRC. The company admitted that it had told HMRC that it had received payments of £2,141,720 from Medpro. The appellant, although not a named director of the company during some of the periods assessed, was its controlling mind and thus a shadow director (and thus brought within the ambit of the penalty provisions). As a director of the company, the appellant had also failed to declare VATable sales to HMRC in his directorships of two further companies. This clearly showed a pattern of deliberate behaviour. The disclosure was prompted because the appellant had not told HMRC of the inaccuracy. (11). The company appealed against the assessments (see below) but following the company entering into liquidation, these appeals were withdrawn by the official receiver. The company did not appeal against the company penalty. (12). On 11 April 2022 HMRC issued a notification to the company and to the appellant that they were making the appellant personally liable for the company penalty under paragraph 19 (1) of Schedule 24 to the Finance Act 2007. In other words the PLN. (13). The PLN is addressed to the appellant’s correct address. (14). The evidence that this was actually sent to that address came from Officer Harris. He was taken to a screenshot which, in his view, demonstrated the HMRC process which is used generally (and in the case of this appellant, in particular) when letters are compiled by an HMRC officer and then sent to a taxpayer. (15). Officer Harris was the officer who compiled the PLN and it was sent to the appellant and also to the company along with a schedule and a payslip. He used a precedent letter to compile the PLN, introducing into it the specific details of this appellant. He generated the PLN on 11 April 2022, i.e. the date of the covering letter. (16). Once compiled, these documents were then backed up and transferred, overnight, to a third-party contractor. The role of that third-party contractor was to print off the documents which had been batched up and sent to it, and then send those documents to their designated recipients, in the post. (17). The system demonstrates that it had “created” something on 13 April 2022 which, according to Officer Harris, was the date on which the PLN and the company paperwork were printed off ready to be sent out by the third-party contractor to the appellant. (18). Once Officer Harris had created the letter and it had been batched up, there was no possibility of his further involvement. He could not review or amend it. As far as he was aware it was issued by the third-party contractor on the date on which it was created. (19). As far as Officer Harris was concerned, the letter would have been sent out by the third-party contractor, straight away. Officer Harris did not, himself, do anything to delay the posting of the PLN. The information requests (20). In the Summer of 2019, HMRC endeavoured to engage with the company (and the appellant) in order to obtain records justifying the company’s VATable sales and the nil VAT returns which it had submitted during the relevant periods. This culminated in HMRC issuing a Schedule 36 information notice on 18 July 2019 asking for the company’s sales and purchase day books, cash book, petty cash records, and sales and purchase invoices. The company failed to comply in response to which HMRC issued penalties. (21). The appellant’s position was that throughout the investigation the company had tried in every way possible to provide the information requested but its records were held by an accountant who had disappeared. The name and address of the accountant had been given to HMRC. The company could not supply what it does not have. This position was repeated in a number of letters from the appellant to HMRC, including that which accompanied the appeal of 24 June 2020. The Insolvency Service (22). Email correspondence between Mr Ross Wheeler, an examiner working for the Official Receiver, and the appellant shows that the appellant failed to attend an interview which had been arranged for 13 March 2022. That interview was then rearranged for a later date in March. The appellant responded in an email of 3 May 2022 explaining that he thought there was little point in having a meeting because he had none of the financial records which Mr Wheeler wanted to see. Mr Wheeler, however, wanted to interview the appellant in any event and indeed wanted him to complete a booklet and provide details of any assets owned by the company including monies held in the bank. A further face-to-face meeting was booked for May 2022 which was inconvenient for the appellant and the interview was rearranged for 14 June 2022. In an email of 13 June 2022, the appellant explained that as per his previous emails, the company held no relevant records as they had been passed on to the accountants. He also attached a letter which he claimed to have sent to the bank requesting bank statements to which he had received no response. He wanted to cancel the meeting scheduled for the following day. (23). In an email of 13 June 2022, Mr Wheeler told the appellant that he was required to attend and indeed had a duty to do so. If he failed to attend Mr Wheeler could apply for a public examination by the court which, if the appellant failed to attend, could be followed up by an application for an arrest warrant. (24). A meeting between Mr Wheeler and the appellant was held on 14 June 2022. Following that Mr Wheeler told the appellant in an email of 17 June 2022 that he had tried to make contact with the company’s accountants but could find no trace of them from Internet searches and it appears that the address given was a residential address. The appellant responded to this on 20 June 2022. Mr Wheeler, once again, sought all the company’s books and records from the appellant on 21 June 2022, to which, two days later, the appellant responded saying that; he did not have them; there was little point in setting a 7 day deadline; he had been to the accountant’s premises and that the accountant was no longer there; and as a director he had done what he could humanly do. He had taken all steps as a responsible person to obtain the records. The appeals (25). On 24 June 2020, the company appealed against the assessments. The grounds of appeal were that the “assessment raised by HMRC is based on the assumption that we as a company did not have any attributable cost to the supply tax calculated”. (26). HMCTS rejected the company’s appeal on the basis that it had neither been granted hardship, nor had paid the tax outstanding. The company therefore made a second appeal, on 22 July 2020, having made an application for hardship (the application was made to HMCTS rather than to HMRC). (27). The grounds of appeal in this second appeal were that “the assessments from HMRC only takes into account of output VAT they have from other sources without attributing any nuts associated with the outputs”. I presume the reference here to nuts is to inputs. (28). It was the appellant’s evidence that the PLN did not drop through his letterbox until 27 June 2022. That was when he first became aware of it. (29). On 27 June 2022, the appellant lodged an appeal against the PLN. The notice of appeal declared it to be in time. His grounds for appeal included the fact that the company was still disputing the alleged VAT; HMRC had taken it on themselves to wind up the company before the hearing had been undertaken; he had done no wrong and he believes the value assessed by HMRC on the company was wrong. (30). The 30 day period for appealing against the PLN expired on 11 May 2022. His appeal is therefore 47 days late. (31). On 14 April 2023, HMCTS asked for an explanation why the appeal had not been made in time to which the appellant replied on 18 April 2023 telling the tribunal that the PLN had not been received by him until 27 June 2022. F and BP’s (32). On 25 February 2021, HMRC sought further and better particulars of the appellant’s grounds of appeal. Judge Cannan directed that the appellant should provide further and better particulars which set out a summary of all facts and matters on which the appellant would rely in his appeal. (33). In response the appellant asserted:

“4) CONCLUSION The appellant’s grounds of appeal is: i) The respondent has calculated the VAT based on the alleged list of invoices obtained from Medpro Healthcare Limited without taking account of associated cost of these invoices. We the appellant has gone through our limited records and can find payments from Medpro Healthcare Limited totaling £2,141,720 in the period of assessment From recollection the margin maintained for sale of goods was between 3% and 5%. We have opted to go for the lower percentage as these does don’t include other administrative cost which carries associated input tax. At 3% the associated margin would have been £64,251.60 and the related output tax would have been £12,850.32 ii) We the appellant have contacted Medpro Healthcare Limited and were made to understand that these invoices listed by the respondent have been discounted from their VAT returns yet the respondent still seek the appellant to make payment. If this is the case the respondent should not be seeking any payment from the appellant iii) The respondent has not been able to supply to the appellant these alleged invoices yet still hold to the claim of £2,625,883. The Appellant seek Credit for all the assessment as we have asked for prove of these invoices from the respondent but has not been provided. We are of the opinion that these are list if figures that has no relationship to actual invoices. From the points above we the appellant seek a reversion of ALL the assessment or if Medpro Healthcare Limited assertion turnout not to be whole correct the value of £12,850,32 is due to the respondent not £2,625,883”. i) The respondent has calculated the VAT based on the alleged list of invoices obtained from Medpro Healthcare Limited without taking account of associated cost of these invoices. We the appellant has gone through our limited records and can find payments from Medpro Healthcare Limited totaling £2,141,720 in the period of assessment From recollection the margin maintained for sale of goods was between 3% and 5%. We have opted to go for the lower percentage as these does don’t include other administrative cost which carries associated input tax. At 3% the associated margin would have been £64,251.60 and the related output tax would have been £12,850.32 ii) We the appellant have contacted Medpro Healthcare Limited and were made to understand that these invoices listed by the respondent have been discounted from their VAT returns yet the respondent still seek the appellant to make payment. If this is the case the respondent should not be seeking any payment from the appellant iii) The respondent has not been able to supply to the appellant these alleged invoices yet still hold to the claim of £2,625,883. The Appellant seek Credit for all the assessment as we have asked for prove of these invoices from the respondent but has not been provided. We are of the opinion that these are list if figures that has no relationship to actual invoices. Medpro error correction (34). On 17 September 2020 Medpro submitted form VAT 652 entitled “Notification of Errors in VAT Returns to HMRC”

. In explanation as to why the error had occurred, Medpro referred to a covering letter. That letter, dated 18 September 2020, explained that: “The error arose as a result of the VAT number for Webstar Dixon being revoked, termination notice issued and the invoices not paid within six months. This was brought to our attention in July 2020 for invoices that were in dispute. These invoices were in dispute awaiting credit notes and agreed that payment deadlines vacated until licences for West Africa obtained and final account balance discussed and agreed. It would not be normal to have so much payable without such an agreement in place. We have requested a further written confirmation from [the appellant] a director of the companies involved”. (35). The amount of VAT identified in this error correction notification was £3,288,938. It was adjusted in Medpro’s VAT return for 06/20. Medpro paid this amount to HMRC. This included all of the invoices supplied by the company during the VAT periods in question. The appellant’s supplemental oral evidence (36). In addition to the evidence reflected in the foregoing facts, the appellant said the following in his oral testimony: he could not appeal against the PLN until 27 June 2022 because it was not until that date that he received notification of it; as far as he was aware, Mr Wheeler of the Insolvency Service would have known of the PLN at the time of the meeting on 14 June 2022 yet he made no mention of it at that meeting; there was little point in having a meeting with Mr Wheeler since, as he had told HMRC, and repeated to Mr Wheeler, he did not have the company’s books and records which were with the accountant; the company’s appeal of 24 June 2020 against the assessment of 28 May 2020 was an in time appeal; the reason it was out of time in relation to the assessment of 27 March 2020 was because at that time the company was operating from a serviced office: the manager of that serviced office had changed prior to that time, and the distribution of letters within the serviced office had become inefficient; that first assessment, therefore, had not come to the company’s notice in March 2020; notwithstanding the plethora of companies of which he was a director, he had always kept up with his statutory obligations; he was not aware of the fact that the company had sent invoices to Medpro. DISCUSSION The late appeal application- part 1 Submissions

DISCUSSION

[5]In summary the appellant submitted as follows: (1). He did not receive the PLN until 27 June 2022 and he made his appeal on that date. (2). He has experience with tax appeals and so would have appealed in time if he had received it earlier. (3). HMRC have not proved, to the required standard, that the PLN was sent to him on 11/13 April 2022. (4). If it had been issued and sent to him on or around that date, Mr Wheeler would have known about it and mentioned it in his correspondence with the appellant and at their meeting on 14 June 2022. (5). There was a good reason why he did not provide the VAT records to HMRC or to Mr Wheeler. They were with his accountant. He is therefore not a serial defaulter when it comes to providing information or missing meetings. (6). There was also a good reason why the company appeal against the assessment of 25 March 2020 was made late. This was because of the dilatory postal distribution regime adopted by a new office manager at the company’s serviced office.

[6]In summary Mr Hayhurst submitted as follows: (1). The VAT assessment issued to the company on 25 March 2020 was appealed out of time. (2). The appellant is an experienced company officer and therefore knew that he should have appealed against the PLN within 30 days. (3). Furthermore, he has considerable experience of litigating proceedings before the tax tribunal through some of his other companies. (4). He is a director of a tax consultancy and thus has experience with the tax system. (5). He has failed to comply with directions made in this appeal (he is still in default of obligations under a letter sent to him by the tribunal on 20 November 2023 and is also in default with an Unless order). More broadly, as demonstrated by the correspondence with Mr Wheeler, he has demonstrated a repeated pattern of non-compliance which aggravates the seriousness of his failure to comply with the 30 day time limit. (6). The appellant was not a credible witness. He claimed to have brought the appeal in time, when it was clearly 47 days late. He said he had complied with the requirements of Mr Wheeler, which again he has not.

My view

[7]With these facts and submissions in mind, I now turn to consider the three stage Martland test.

[8]At stage one I need to consider whether the delay in making the appeal is serious and significant. This is for two reasons. Firstly, if it is not and the delay is very short, then that might be an end to it and there might be no need to go on to consider the reasons for the delay and the final evaluation stage. Secondly, if the delay is serious and significant, that is something to be weighed in the balance at the final evaluation stage.

[9]Although not expressed in clear terms, I think that the appellant is suggesting that the appeal is not late in the first place because although the PLN appears to be dated 11 April 2022, it was not in fact issued on or around that date, and was only issued later, around 27 June 2022, and so his appeal which was made on that date is not late.

[10]I do not accept any such submission. I am satisfied from the documentary evidence and evidence of system by Officer Harris, that having drafted the PLN, it was batched up and sent to the third-party contractor for posting. It was then posted by that third-party contractor on or around 11/13 April 2022 to the correct address. It was not tampered with, reviewed, amended, or affected by any act or omission of Officer Harris or any of his colleagues at HMRC once it has been sent to the third-party contractor. There is adequate evidence of satisfactory system here for me to infer that it was issued by Officer Harris on the date it bears, namely 11 April 2022.

[11]I therefore find that the appeal on 27 June 2022 against the PLN is late by approximately 47 days. This is sufficiently serious and significant to warrant an investigation as to the reasons for the delay, and for the delay to weigh in the balance at the final evaluation stage.

[12]I now turn to the reasons given by the appellant as to why he made a late appeal. His position is very straightforward. It is that he did not receive the PLN until 27 June 2022, and appealed against it on that date.

[13]Under section 7 of the Interpretation Act 1978 (“section 7”), which applies to service of documents authorised or required by legislation, “service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post”.

[14]For the reasons given at [10] above, I’m satisfied that, on the balance of probabilities, the PLN was properly addressed to the appellant and posted to him on or around 11/13 April 2022.

[15]The burden then shifts to the appellant to satisfy me, again on the balance of probabilities, that he did not receive the PLN until 27 June 2022.

[16]His evidence is simply that he did not receive it. Corroboration is provided by firstly his submission that had he received the PLN on or around 11 April 2022, as a person with considerable experience of the tax system, he would have appealed it. The fact that he didn’t is, of itself, evidence that it was not received on or around that date. The second is that the appeal against the assessment of 28 May 2020, issued to the company, was appealed in time on 24 June 2020. There is a sensible explanation for why the assessment of 27 March 2020 was not appealed in time. The office manager had not distributed that assessment to the company within 30 days of its promulgation.

[17]I then need to proceed to the third stage of the Martland test. I need to conduct a balancing exercise assessing the merits of the reasons for the delay, and taking into account its seriousness and significance, with the prejudice which would be caused by granting or refusing permission. And I remind myself that when conducting this balancing exercise, litigation must be conducted efficiently and at proportionate cost, and statutory time limits should be respected.

[18]I must take into account all relevant factors, and one of these is any obvious strength or weakness of the applicant’s case.

[19]Given that this was fully argued in connection with the strike out issue, I shall now consider it, and then return to the final stage of the Martland evaluation. The Strike out Submissions

The Strike out

[20]In summary, Mr Hayhurst submitted as follows: (1). The company’s grounds of appeal are clearly that the company had input tax for which HMRC have given the company no credit. Yet neither the appellant nor the company, notwithstanding extensive requests for this, have provided any primary information that any input tax had been incurred by the company in respect of the supplies made to Medpro. (2). HMRC cannot be impugned for failing to consider alternative evidence of any input tax suffered by the company in light of the repeated requests for information. (3). There is no evidence, therefore, that any input tax was suffered by the company on the supplies to Medpro. (4). Any claim for input tax deduction is now out of time as more than four years have elapsed in relation to all the VAT periods which are in issue in the assessments. (5). The company was neither using, nor was entitled to use, cash accounting. (6). The invoices issued by the company to Medpro are evidence of taxable supplies on which it was obliged to account for output VAT on a quarterly basis. The company did not do this. It submitted nil returns and accounted for no output tax. (7). For the company to be able to make a claim for bad debt relief, the claim would have to have been made within four years and six months from the date of the supplies. The invoices are all made between April 2016 and October 2018, and the four and a half year period, therefore, for the latest of these ended in April 2023. The company is therefore out of time to claim VAT debt relief. (8). The error correction made by Medpro in respect of the company invoices does not affect the assessments. That is a matter for Medpro. If VAT has effectively been paid twice (by the company under the assessments for which no input tax recovery has been allowed and by Medpro by virtue of the error correction) and that is just the way the VAT system works. The company could have made a claim for bad debt relief which it has failed to do. (9). HMRC have supplied details of the invoices (bar one) which underpin the assessments.

[21]In the summary, the appellant submitted as follows: (1). The issues in the substantive appeal against the assessments have not been tested. It is wrong therefore that HMRC say that there is a debt owed by the company to HMRC, and this can be passed on to the appellant under the PLN. (2). HMRC are seeking to get double recovery both from the company (and, through the PLN, from the appellant) and from Medpro. (3). The company is not liable to pay VAT on the invoices which have been reversed out by virtue of the error correction notice submitted by Medpro. Therefore, there can be no company penalty, nor PLN visiting the penalty on the appellant. (4). He did not come to the hearing prepared to deal with evidence of inputs. He thought it was all about his liability under the PLN. He did not think that the issue would involve the relationship between the company and Medpro. (5). He was not responsible for issuing the invoices to Medpro. There were other people at the company who dealt with the invoices. He did not know that Medpro had received invoices from the company.

My view

[22]Dealing with this last point first, I do not accept the appellant’s submission or as a fact, that there were other people at the company dealing with the invoicing, and that he did not know that the company had made supplies to Medpro as evidenced by the invoices. Nor indeed that he was unaware that supplies to Medpro were an issue in this application for strike out.

[23]It has clearly been in the notice of objection since 19 June 2023. Furthermore, as an experienced tax litigator, and a self-professed tax expert, the appellant was more than able to research the issues regarding the PLN, and the late appeal, which clearly involve an examination of the underlying issues. And the application for strike out set them out in stark terms.

[24]So it has, or should reasonably have, been abundantly clear to the appellant that in order to oppose the strike out application, he needed to consider and bring evidence in relation to his assertion (or rather the company’s assertion in its notices of appeal) that HMRC had given no credit for input tax to which the company was entitled in respect of the supplies to Medpro.

[25]Furthermore, and irrespective of that general principle, the company was specifically directed by Judge Cannan to provide detailed particulars of its grounds of appeal, one of which involved the issue of input tax recovery. Yet the appellant brought no evidence before me to suggest that there was any input tax incurred on the supplies made to Medpro.

[26]It seems to me that the appellant was grasping at straws when, in the last throes of the hearing, he said that was not aware of the fact that the company had sent invoices to Medpro. This was the first time that it was mentioned in all of the correspondence and the oral testimony.

[27]The company’s pleaded case that it has suffered input tax for which it has received no credit is only relevant if it has made corresponding outputs. The appellant challenges the double recovery position of HMRC on the basis that the company had made taxable outputs, and Medpro would get no recovery for deductible input. Yet there can only be double recovery, in theory, if the company made taxable outputs. So to make this assertion in the first place, the appellant must have been aware of such taxable outputs.

[28]I reject the appellant’s assertion of ignorance of invoicing Medpro and find as a fact that the appellant was fully aware that the company had made supplies to Medpro in the amounts evidenced by the invoices which are the subject matter of the assessments, and that those invoices reflected underlying supplies.

[29]The appellant made no serious challenge to HMRC’s submission that there were supplies because there were invoices.

[30]Nor did the appellant make any serious challenge to the validity of the PLN. He did not, for example, suggest that he was neither a director nor shadow director during the period in question, nor that there was some technical deficiency in the way in which the company penalty had been calculated, nor that he had not behaved deliberately, nor that there was some other reason why the company penalty could not be visited, in whole, on him via the PLN.

[31]The evidence clearly shows that the company made supplies to Medpro. HMRC have provided evidence of the value of the supplies and the details of the invoices in the main bundle. The assessments are based on those invoices. The appellant as director or shadow director of the company was fully aware of the supplies made by the company to Medpro and of the invoices. The company should have accounted for output VAT on those invoices on a quarterly basis. It did not do this. It submitted nil returns. It was not paid for those invoices, but is now out of time for making a bad debt claim. The company penalty was based on deliberate behaviour by the company. It is effectively deliberate behaviour by the appellant.

[32]There will be a deliberate inaccuracy in a VAT return where there was an intention to mislead HMRC on the part of the taxpayer as to the truth of the information set out in that return. In light of the appellant’s knowledge of the supplies in question as well as his experience, with other companies, of the VAT system, it is clear to me that he knew full well that VAT should have been accounted for on the supplies to Medpro. But by omitting that VAT from the VAT returns, he intended to mislead HMRC as regards the VAT due on those returns. This is clearly deliberate behaviour and justifies the company penalty and the PLN.

[33]The fact that a Medpro reversed out its input tax recovery claim by submitting the error correction notice does not affect the company’s liability to output VAT, nor to the company penalty number, nor the appellant’s liability under the PLN.

[34]The appellant has provided no evidence of the company’s right to input tax recovery, nor has he suggested any alternative evidence that HMRC might take into account to justify a claim by the company. In any case, any claim by the company for such input tax credit is now out of time.

[35]When considering whether appeal should be struck out, I must consider whether the claimant has a realistic as opposed to a fanciful prospect of success. And a realistic claim is one that carries some degree of conviction. It must be more than merely arguable.

[36]I can take account not only of the evidence before me but also what further evidence might actually be available at trial. And I must hesitate to strike out if I think that a fuller investigation of the facts than those which were before me, might affect the outcome of the case.

[37]I have no hesitation in saying that in my view, the appellant’s prospects of succeeding in the substantive appeal against the PLN are fanciful. He has behaved deliberately as has the company. The company was liable to pay VAT on supplies to Medpro which it did not account for. The company has provided no evidence of allowable input tax suffered by it which is attributable to the making of those supplies. And yet it has had more than ample opportunity to do so.

[38]Given that the company, and the appellant to date, has provided no evidence of such allowable input tax, I cannot see that it will be able to do so at a hearing at which there will be a fuller investigation of the facts.

[39]In light of this, if I were to give permission for the appellant to bring his appeal against the PLN, out of time, I would then strike out his substantive appeal against the PLN.

The late appeal application- part 2

[40]I now return to the final evaluation stage of the Martland test.

[41]In light of the assertion by the appellant that he was unaware of the invoices provided by the company to Medpro which, as I said above, I have found not to be a credible or reliable assertion, I do not find the appellant to be a credible or reliable witness.

[42]Like HMRC, therefore, I do not accept his version of events regarding receipt of the PLN only taking place on 27 June 2022. Nor do I accept his explanation as to why the appeal against the company assessment of 27 March 2020 was made out of time. In both cases it is my view that he (in the case of the PLN) and the company (in the case of the company assessment) received the relevant document on or around the date on which it was issued. And the presumption that it was properly served, in both cases, has not been rebutted by the appellant’s evidence. I do not accept his submission that had he received the PLN in April 2022, he would, as an experienced professional, have appealed in time. This could be said of many cases where late appeals are brought and for some reason a time limit has been missed. I do not know the reason why the time limit was missed in the case of this appellant, nor by the company in respect of the company assessment. But I do not accept as submitted by the appellant, that simply because the submission of the appeal was made late, that is evidence of late receipt.

[43]So, at the final evaluation stage, when I must balance the reasons given for the late appeal against the prejudice which will be caused to either party in giving or rejecting the application, I find that the balance weighs heavily against the appellant.

[44]I have also found that there are fundamental weaknesses to his case, and that if I were to give permission, I would strike it out as it has no realistic prospect of success.

[45]Finally, at this final evaluation stage I must pay particular heed for the need for litigation to be conducted efficiently and at proportionate cost and that time limits should be respected. This is especially true in the case of the appellant who has considerable experience of the tax system and tax litigation and has failed to give this litigation the respect it warrants.

[46]Given the foregoing, I reject the appellant’s application to bring his appeal against the PLN out of time.

DECISION

[47]I reject the appellant’s application to bring his appeal against PLN out of time.

[48]Even if I had given permission, I would have struck out his appeal against the PLN.

Right to apply for permission to appeal

[49]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. NIGEL POPPLEWELL TRIBUNAL JUDGE Release date: 3rd JANUARY 2024